Corporations Need To Pay More Taxes

Sen. Jon Kyl’s recent Guest Comment (“Revenues aren’t the problem; spending is ...”) is filled with suede-shoe rhetoric. Spending is part of our fiscal problem, to be sure. However, that’s because earlier this decade Sen. Kyl and the Republican majority at the time approved two huge Bush Administration tax cuts totaling over $3 trillion, without making any offsetting cuts in spending. Now he wants President Barack Obama and the present Democratic majority to clean up the fiscal mess by making draconian cuts in spending to accommodate the irresponsible fiscal policies of the earlier Bush-Cheney-Kyl Administration.

Here are a few basic facts about our fiscal situation:

• According to both the right-wing Heritage Foundation and the Organization for Economic Co-operation and Development (OECD), all forms of federal, state and local taxes in the United States equal just over 28 percent of our Gross Domestic Product (GDP). That is the lowest percentage among all developed countries except Japan and compares to an average for OECD members of 36 percent.

• According to the U.S. Office of Management & Budget (OMB), the federal portion of the tax bite (excluding state and local taxes) historically has averaged 17 percent to 18 percent, rising as high as 21 percent in good times and sliding to as little as 14 percent in weak periods. It was only about 15 percent last year. Overall, it’s been quite consistent. In the decade of the 1950s, it averaged 17.2 percent, while in the 2000s, it averaged 17.9 percent. What has not been consistent is the distribution between the part paid by people and the part paid by corporations.

In the 1950s, corporate income taxes averaged 4.8 percent of GDP, while individual income taxes and other federal revenue sources averaged 12.4 percent. By the decade of the 2000s, the corporate share had dropped to an average of only 1.9 percent of GDP, while the rest of us paid the balance of 16.1 percent.

The corporate income tax share dropped by 60 percent, while the share paid by the rest of us climbed by 30 percent. In fact, last year the corporate income tax share was estimated at only 1 percent of GDP. That’s close to a free ride.